Case closed? The finality of arbitrations in the gas and LNG Industry

Arbitration is frequently used as a means of dispute resolution in the global gas and LNG industry. This is demonstrated not only by the caseloads of arbitral institutions but also the pervasiveness of arbitration clauses in various agreements including joint venture agreements, financing agreements, government contracts and supply and purchase contracts.

Public policy and the finality of arbitration: One of the main benefits of arbitration is its finality. Parties generally need not worry about protracted and costly appeals, and arbitral awards can be enforced with relative ease under the New York Convention.

However, most jurisdictions, including England, New York and Singapore, provide limited grounds upon which arbitral awards can be challenged or denied enforcement by the local courts.

In England, pursuant to the Arbitration Act 1996, an arbitral award may be challenged on the ground of serious irregularity that has caused or will cause substantial injustice to a party. “Irregularity” encompasses an award which was procured by, or is itself contrary to, public policy. Similarly, an award that is contrary to public policy may be denied enforcement.

In practice, it has been difficult to exhaustively define the considerations of public policy that matter for the purposes of the Act. However, recent developments have highlighted two issues that members of the gas and LNG industry should be conscious of:

Corruption – English courts may intervene in cases of corruption in international commerce, although ascertaining the requisite degree of misconduct is not straightforward. In a recent case, the English Commercial Court held that arbitral awards based on manifestly illegal contracts, such as a contract to bribe, will not be enforced. In contrast, awards based on contracts merely tainted by failed bribery attempts will be enforceable.

Sanctions – English courts have yet to consider whether awards made on the basis of agreements that breach UN or EU sanctions would be open to challenge or denied enforcement. Nevertheless, industry players should tread carefully given that sanctions have the potential to affect activities that are part of the value chain and the financing of those activities.

Practical takeaways: Arbitration’s finality makes it an attractive means of dispute resolution in the gas and LNG sector. However, there are limited grounds upon which arbitral awards may be challenged or denied enforcement including incompatibility with public policy. Parties should bear this in mind when considering the approach to take in a dispute.

Join in on the conversation: What is your experience in oil and gas industry arbitration? Leave a comment below.

Are you interested in speaking at Gastech 2017? The Gastech Japan 2017 call for papers is open until September 9, 2016. Submit your abstract and become a speaker at the largest global gas and LNG event in 2017.

Gas will be an essential part of the future energy mix as the world moves to a low-carbon future; playing a significant role in reducing carbon emissions and air pollution, and being a secure, diverse and flexible energy supply.

While gas markets are currently well supplied, the transformation of natural gas markets from regional systems to more globalised and interdependent markets is creating new security challenges, according to the International Energy Agency's latest asse

With LNG finding a role as a fuel of choice in new markets, there has been a significant increase in demand. The most notable increase comes from Asian markets, with China’s LNG consumption dramatically increasing by approximately 35% each year.

With more than 45 years of experience operating integrated gas infrastructures, Enagás has adapted its facilities to an evolving and dynamic LNG market, switching from the traditional LNG terminal model (unloading, storage and regasification and LNG tr

Interview with DougWood, Chairman of the Gas Committee, European Federation of Energy Traders

There has been continued progress in the development of European gas hubs in the past few years, however there are still some very important hurdles to overcome before Europe can have highly efficient and mature gas markets.

Gas will be an essential part of the future energy mix as the world moves to a low-carbon future; playing a significant role in reducing carbon emissions and air pollution, and being a secure, diverse and flexible energy supply.

It has been projected that by 2020, North America will become energy self-sufficient and maintain its position as the world’s largest natural gas producing region; and as LNG grows seven times faster than pipeline gas trade, LNG may account for half of

While gas markets are currently well supplied, the transformation of natural gas markets from regional systems to more globalised and interdependent markets is creating new security challenges, according to the International Energy Agency's latest asse

With LNG finding a role as a fuel of choice in new markets, there has been a significant increase in demand. The most notable increase comes from Asian markets, with China’s LNG consumption dramatically increasing by approximately 35% each year.

Global LNG spot market trade grew by 45% year on year in 2016, with spot cargoes now trading a number of times before they reach the consumer, and in some cases changing hands up to six or seven times.

This website stores cookies on your computer. Our cookies are used to improve our website and provide a more tailored service to you, both on this site, and through other media. By using this site, you agree to our use of cookies.